Devott Service Outsourcing Research Center

As a sunrise and emerging industry in China, the country attached great importance to its software and service outsourcing industry. Especially under the current background of global financial crisis, the development of such a technology-intensive industry has great significance to the current economic growth, promote employment, especially for college graduates, as well as the industrial structure adjustment and optimization.
Up to now, China's software industry still shows a rapid growth trend, with a growth rate higher than the average level of electronic information industry. The industrial-scale continues to expand, software export grows steadily, and the industrial structure and layout is under continuous adjustment, the software industry becomes an important strength to boost the development of electronic information industry, and has also played an active role in promoting the national informationization process.

Under the complicated domestic and global economic situation, China's software industry presents the following features:

1. Industrial scale continued to expand.

Since 2000, China's software industry has maintained a 38% average annual growth rate. Though the growth rate has slowed down after the financial crisis broke out, it still maintained a 29.8% growth rate. From January to May, 2009, the software industry got a total revenue of 329.14 billion yuan, up 23.3% over the same period last year, dropped 0.2 percentage points than January to April.

Figure I: The software industry revenue structure for January ~ May of 2009

2. Software industrial structure got further adjustment.

Along with the rapid development of software industry, the industrial scale, product structure, R & D capability and personnel composition have been further adjusted, the market goes to large enterprises; the products transform to service-oriented, the technology propels to international forefront, and the personnel moves to the knowledge and technology oriented as well as high education level.

For the industrial scale, the enterprise strength continually enhances, large enterprise advantages become more and more obvious; for the product structure, software technical services and the embedded software based on the manufacturing sector grow rapidly, and has become an important force in the software industry development; for the technical level, most enterprises are focused on to promoting the innovation capability, strengthen the research and development efforts, and constantly push forward to the international forefront; for the personnel composition, the overall quality is ever-increasing, with the knowledge structure optimization.

3. A clear trend of software and hardware integration.

Enterprises are focused on brand efficiency, further strengthen the product development, brand positioning, marketing and technical services; the integration concept of products and services as well as software and hardware also got enhanced.

Firstly, a huge domestic manufacturing and information technology market constantly create important opportunities for the development of software industry, and promote the continuous integration of software and hardware, as well as the development of embedded software. Secondly, the software service outsourcing trend is stronger while the outsourcing contents are more comprehensive, from the former ITO (information technology outsourcing), BPO (business process outsourcing) to the new KPO (knowledge process outsourcing), BTO (business transformation outsourcing) and so on.

4. Exports grows steadily, service outsourcing boost up.

China's software exports go on expanding with an optimistic growth trend. From January to May, China's software exports reached 6.56 billion U.S. dollars, up 54.2%over the same period last year, and the growth rate is respectively 6 and 9.2 percentage points higher than this January to April and the same period of last year; among which the export of software outsourcing services is 670 million U.S. dollars, up 59%over the same period last year, the growth rate is 1 percentage point higher than January to April, but still 9.3 percentage points lower than the same period of last year. We can see that, in spite of the growth rate is lower, but facing the global financial crisis, China's software industry, especially the software service outsourcing industry still maintained a relatively stable development.

　
5. Industrial agglomeration and intensive regional distribution.

Figure II：The national sub-regional income growth of the software industry in 2009(January to May)

From the geographical distribution, China's software industry owns an obvious industry agglomeration effect; the regional distribution is relatively intensive. The software industry develops fast in Bohai circle areas, Pearl River Delta and Yangtze River Delta. There are 7 provinces like Beijing, Guangdong and Liaoning etc. whose total software industry revenue is more than 10 billion yuan, the total sum of these provinces and cities' software industry revenue account for about 83% of China's software industry revenue.

Up to the end of 2008, the Ministry of Commerce of China has designated 11 software export innovation bases including Beijing, Tianjin, Shanghai, and Dalian etc., and initially formed a national software export strategically layout. Relevant statistics show that in 2008, amount of software exports of these 11 bases exceeded 2.58 billion U.S. dollars and which account for 77% of the total national exports; they have effectively played a demonstration role as the main body of state-level software export. In recent years, in order to promote the healthy and rapid development of service outsourcing industry, the state has released a large number of supportive policies, and so do the base cities and regional parks. They establish special fund to support the industry and enterprises from all aspects like macro policy, industry plan, training, investment attracting, integrated coordination etc.

Take Tianjin for example, to 2010, Tianjin will set up not less than RMB 200 million annual special fund to support its software and service outsourcing industry, and on basis of which, TEDA (Tianjin Economic-technological Development Area) also set up RMB 100 million special fund. In addition, the world-class Tianjin Binhai Service Outsourcing Industry Park has been put into use in early 2009, working closely with the government, taking full use of the geographical advantage of Tianjin and the abundant human resources in Beijing-Tianjin-Hebei, relying on the relatively independent preferential policies and business opportunities brought by the development of Tianjin Binhai New Area, the Park attract domestic and foreign excellent enterprises and realize leap-forward development. The largest national animation industry base - National Animation Industry Integrated Demonstration Park construction project officially started on July 1 in Tianjin Binhai New Area. According to the plan, this park will be built to be a national-class, international, large-scale, integrated and open animation industry demonstration park, as well as the Chinese Disney and Dream Work.

At present, TEDA owns a number of ITO, HRO, FAO, logistics services, after-sales service and R&D outsourcing enterprises, the outsourcing service industry is showing a growing developing momentum. In 2006, it realized software revenue of about 7 billion yuan, software and services export income is more than 5 million U.S. dollars. There are some leading and representative companies like Beyondsoft Group, Hi-Think Computer Corporation, Xi'an CompuPacific International, Wuxi PharmaTech (CRO) and so on.

Under the influence of the international financial crisis, software industry enjoys the fastest development in China, and it's also the soul of the whole information industry. For the last 30 years since the reform and opening up, China has accumulated and laid a good foundation on aspects like national macro-policy, business environment, software enterprise capability and international talents storage. Now the country is focused on setting up a featured software industry chain of market demand-oriented, taking market-value maximization as the goal; covering all software companies, traditional industry enterprises, information products manufacturing enterprises, the internet value-added services enterprises and research institutes; and pursuing "orderly coordination, sharing resources, and mutual complementarily"; thus to meet the basic needs of the domestic market, construct itself to be the most influential economy in the international software industry, and achieved the development of China's software industry by leaps and bounds.